The company has reviewed the valuation of its fleet and is not expecting to make any more write-downs as there is evidence in the marketplace of valuations starting to recover
(), the aircraft leasing company, said there is evidence in the marketplace that aircraft valuations have started to recover.
As has been well documented, the airline industry has been hit hard by the pandemic and concomitant restrictions on travel, and to reflect this Avation has revalued its fleet.
The net impact of the valuation is a reduction in the book value of around US$32mln, with the adjustments spread across turboprop, narrow-body and wide-body aircraft.
The widespread rollout of vaccination programmes has resulted in a rapid recovery in regional and domestic air travel and Avation’s view is that, should this trend continue, it may lead to a future recovery in the airline industry and aircraft valuations.
At the end of June, Avation had total cash and bank balances (including restricted cash) of US$122.3mln (unaudited), up from US$117.6mln at the end of 2020. Furthermore, during the first half of 2021, the company has reduced its gross loan balances by $59 million (unaudited) by repaying aircraft loans.
The weighted average age of the aircraft fleet on 30 June 2021 was 5.1 years, the weighted average remaining lease term was 6.2 years and the total future minimum lease payments receivable under non-cancellable leases was about US$717mln.
“The company is optimistic of a return to profits in the future when the pandemic recedes and as the market recovers. It is our opinion that aircraft valuations will trend upwards as flying recovers. The company both improved its cash position and significantly lowered its debt during the second half of the financial year,” said executive chairman, Jeff Chatfield.
“The company has conducted an impairment review in accordance with its accounting policies and taken a conservative approach to valuing its fleet. Passenger traffic is returning rapidly as the global vaccination rollout provides support for a return to air travel. Management believes that should the demand for air travel continue to return to pre-pandemic levels aircraft valuations are likely to recover in the future,” he added.
“We are confident that impairments resulting from COVID-19 have been fully captured and conservatively accounted for, thus enabling the opportunity for the company to progress to a post-pandemic return to profit in future,” Chatfield concluded.